How you can take your pension money

Your pension pot doesn’t automatically turn into a regular income or get sent to you as a lump sum. You need to tell us how you want to take your money – and there’s a few different ways to choose from.

How to take money from your pension

Warning! Your pension pots are meant to provide an income for your retirement. It may be tempting to cash them in for other things, but you may be left only with the State Pension to live on and any other savings you have.

If you haven’t already received any guidance or advice from a financial adviser who specialises in retirement planning, we strongly recommend that you contact Pension Wise for free, impartial guidance about your options.

Tax considerations when taking money from your pension﻿

It’s important to understand the tax implications of taking your pension savings – the amount of tax you’ll have to pay can be a major deciding factor when you’re choosing how to take money from your pension pot.

You’ll also need to watch out for emergency tax when taking money from your pension.

You can keep your pension pot with us for as long as you like. And when you do decide you want to access your pension pot later down the line, you can choose to take it through any of the retirement options available from The People’s Pension, at any point you choose (after you’ve turned 55).

If you take all of your pension pot in one go, you won’t be able to then choose any other options because you won’t have any money left in your pension pot to take.And no matter how much you had in your pension pot to begin with (whether it’s more or less than £10,000) – your account with us will be closed once you’ve taken it all.

If you take part of your pot a bit at a time, taking your tax-free cash gradually, you can use the rest of your pot to take any other retirement option available from The People’s Pension.Or you can continue to take it a bit at a time, taking your tax-free cash gradually. Normally you’d need to have more than £10,000 in your pension pot to do this – but if you’ve already taken one lump sum in this way, you may be able to do it again even if you have less than £10,000 in your pot.

If you choose to take your pot a bit at a time, taking your tax-free cash up front, you have to take all of your tax-free cash (up to 25% of your pot), and move all of the rest of your pot into a flexi-access drawdown account. But, if you change your mind later down the line, you could use what’s left in your flexi-access drawdown account to buy a guaranteed income for example. And if you continue saving with The People’s Pension, you’ll start building up your pot with us. So you can claim your pot through any of the retirement options available from The People’s Pension – once you’ve built it up to a set minimum amount again. (For example, you need at least £2,000 in your pot to move it over to an existing flexi-access drawdown account.)

If you want to transfer to another provider to buy a guaranteed income, or if you transfer to another provider to take any retirement option – you’ll have to transfer your whole pot.Your account with us will then be closed, so it will depend on your new provider’s rules as to which options are available to you.But generally, you can’t normally cash in or change your guaranteed income once you’ve made the agreement.

Retirement scenarios

Deciding how to take your pension savings is a personal decision – we can’t tell you what’s right for you personally. But you can get an idea of how different people take their savings in different ways, by reading our quick case studies…

Meet Rob…﻿

Rob works full-time and plans to stop work completely at 65﻿

He can claim his State Pension straight away and he has three pension pots he has saved up with three different employers.

He plans to merge two of the larger pots together to create a fund that will provide him with a regular income. The smaller pot he wants to cash in to buy a new car.

Meet Rishi…

Rishi plans to retire next year at 58 ﻿

He’s saved into his pension since he was 20 and has built up a reasonable pension pot.

He’s recently been unwell so wants to spend more time with his family. He plans to take a lump sum from his pension for a family holiday then take a regular income.

His ill health will help him secure a good level of guaranteed income from an annuity.

﻿Meet Nicola…

Nicola enjoys her job but wants to go part-time from the age of 60 and retire at 65 ﻿

She plans to take a small lump sum from her pension to pay off her credit card and then another lump sum and a regular income when she stops working.